Noonan must explain €900m 'black hole' in economic forecast, says McGrath
Finance Minister Michael Noonan has been called on to explain a €900m “black hole” in his economic forecasts for the lifetime of the next Government.
Fianna Fáil's finance spokesman Michael McGrath has said it is “simply ridiculous” that included in Mr Noonan's plan to abolish the Universal Social Charge, is €250m that won't happen until 2022, after the lifetime of the new Government.
Mr McGrath was scathing in his assessment of Fine Gael's economic plan, which has stumbled in recent days, and accused Mr Noonan of “scrambling” to make their numbers add up.
Mr McGrath also highlighted another €250m of unidentified “tax compliance measures” in the Fine Gael numbers, which he described as “highly dubious”.
Mr McGrath also described the Fine Gael plan to abolish the USC for everyone as a “runaway tax cut” which would benefit high income earners disproportionately.
“Fine Gael are trying to have it both ways, they are not really abolishing it,” he said.
“But it is a runaway tax as is it limitless. For every €100,00 you go up there is a benefit of €3,000.”
Mr McGrath and Public Expenditure Sean Fleming announced the party's plan to abolish the USC on income up to €80,000 while they are proposing those earning above that would continue to pay the USC at 8%.
He said the party's proposal would effectively eliminate USC for the vast majority of pensions except those very generous pensions enjoyed by a small few.
In relation to the so-called “fiscal space” of additional expected spending power for the next Government, Mr McGrath said Fianna Fáil has identified €8.6bn of extra capacity.
He said that Fianna Fáil is not prepared to commit to spending an additional €1.5bn which the EU looks set to approve in terms of spending, saying it would be important to have a buffer given external risks to the Irish economy.
He said the amount of additional space in year one would be €500m and €1.1bn in year two ramping up toward the end of the term.
Mr McGrath said: “Fianna Fáil has learned the lessons of the past.
“We are committed to a balanced budget and we recognise that any expenditure-increasing or revenue-reducing measures are dependent on projected economic growth.
“We will take a sensible approach to tax and expenditure decisions in the years ahead and prioritise public services”.
He added: “Our overall package of €8.3bn is split 2:1 between expenditure and tax.
“We believe this strikes the right balance between improving take home pay and ensuring families have access to quality public services”.
The party is seeking to eliminate the three lower rates of USC (1%, 3% and 5.5%) and raising the entry point for the remaining rate to €80,000.
Mr McGrath was circumspect about Labour plans to introduce a bank levy, which he said would simply be passed on to customers who are already being hammered by some of the highest mortgage interest rates in Europe.
